Ukraine war will compound cost-of-living crisis, Bank of England warns


Borrowers set to feel the heat as Ukraine war adds to the cost-of-living crisis, Bank of England warns

The war in Ukraine has increased economic uncertainty in the UK and will put pressure on borrowers as soaring energy prices compound the cost-of-living crisis, the Bank of England has warned.

In its latest Financial Policy Committee (FPC) report, the Bank said that if energy bills keep rising amid the conflict, this will put strain on household and business finances.

The FPC added that while Britain’s direct exposure to the Ukraine conflict is ‘limited’, there are indirect channels through which Russia’s invasion could pose risks to the financial system, and it could further disrupt supply chains, which may impact the UK and global economy.

In its latest Financial Policy Committee report, the Bank of England said that if energy bills keep rising amid the conflict, this will put strain on household and business finances

In its latest Financial Policy Committee report, the Bank of England said that if energy bills keep rising amid the conflict, this will put strain on household and business finances

But the Bank stressed the major UK banks remained strong enough to ‘withstand severe market and economic disruption’. 

It added it was monitoring developments in the financial system closely and ‘stands ready to take any measures necessary to help ensure UK financial stability’.

The Bank said borrowers were still likely to be able to keep up with mortgage repayments, though it said their income resilience would be tested and lower-income families would be hit hardest.

The conflict also poses risks to small firms left ‘more vulnerable than they were pre-Covid’ to surging costs as they have taken on more debt amid the pandemic, though it confirmed debt payments remain affordable for most UK businesses.

It added: ‘There is considerable uncertainty about future developments in Ukraine and Russia. Further geopolitical developments could pose additional risks.’

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